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Past research has demonstrated that older adults are more likely than younger adults to exhibit information selectivity in decision making. Two alternative explanations have been proposed to account for this age difference. One explanation attributes the increase in information selectivity to older adults' reliance on prior knowledge, whereas the other explanation suggests that it reflects reduced information processing capacity. The aim of this research was to explore the latter explanation by controlling for experiential factors and varying the cognitive demands involved in decision making. Specifically, participants were faced with unfamiliar decision problems, and had to base their decisions on the available information in order to reach a desired goal. In Experiment 1 younger and older participants were required to play a game involving chance. The outcome payoff was varied between three conditions (approach, avoidance, and control). The results indicated that both the younger and the older participants based their decisions on payoff, though the older participants did so to a lesser extent. In Experiment 2 younger and older participants performed a similar decision task but with higher cognitive demands. Specifically, the decision‐making task included two dimensions of information, outcome probability and outcome payoff. The results showed that the younger participants based their decisions on probability and payoff whereas the older participants based their decisions on probability alone. In Experiment 3 younger and older participants made decisions in a sale context and received instructional cue to incorporate payoff information in their decisions. As before, the younger participants utilized probability and payoff, whereas the older participants based their decisions only on probability information. The findings are discussed in terms of age differences in information‐processing capacity, metacognition, motivation, and goal‐setting.